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Europe's Telco Services Suffer Shrinkage

10:30 AM -- Here's a measure of the task facing Europe's communication service providers (CSPs) as they sink more money into the latest mobile and fixed broadband technologies: Total services revenues in Europe shrank in 2011 and are set to decrease even further this year.

That's according to a new report from European Telecommunications Network Operators' Association (ETNO) , which found that the European telecom services market (including Turkey but excluding Russia, Ukraine and Georgia) decreased by 1.5 percent year-on-year to be worth €274.7 billion (US$351 billion) in 2011, the third consecutive year of decline.

And according to estimates from ETNO's research partner IDATE, it will shrink again this year by about 0.4 percent.

As a result of that gradual contraction, Europe's share of the global telecom services market is now just 25 percent, compared with 31 percent in 2005.

But while revenues might be in decline, network investment levels are increasing: According to the report, European-operator spend increased by 5.2 percent year-on-year in 2011 to €45.4 billion ($58 billion), compared with increases of 1.4 percent in the U.S. and in what ETNO calls "advanced Asia."

Clearly, that's not a sustainable trend -- something's got to give. The team at ETNO, though, is hoping that the much fabled "new sources of revenue" might save the day: "New business models and revenue sources will be needed in order to sustain the pace of investment required in Europe to fully realize the potential of this sector," states ETNO Director Daniel Pataki in the report commentary.

Talk of new models and new sources of revenues have been widespread for years, but while the telcos and their industry organizations continue to scratch their heads, they become ever less relevant. In the meantime, over-the-top (OTT) service consumption eats away at their revenues further and pressures them into greater network investments so that customers don't switch to rival broadband service providers.

Unless CSPs commit wholeheartedly to innovation -- in terms of business strategy, applications and networking -- these new models and new sales they endlessly pine for are unlikely to materialize. Telefónica SA (NYSE: TEF), at least, has realized that something (anything!) needs to be done and is subverting its operating model. At least it will go down fighting if it doesn't survive into the next few decades. (See Slideshow: How Does Cable Use Social Media? and Inside Telefonica's Startup Incubator.)

Its European contemporaries, however, might just wither away without so much as a whimper unless they follow suit.

— Ray Le Maistre, International Managing Editor, Light Reading

shygye75 12/5/2012 | 5:17:28 PM
re: Europe's Telco Services Suffer Shrinkage

Ray -- If all the CSPs wither away, who's going to supply the connection to our smartphones, tablets, and other cool junk?

paolo.franzoi 12/5/2012 | 5:17:26 PM
re: Europe's Telco Services Suffer Shrinkage

Call me when they are losing money...not making less money.


seven


 

Bannana 12/5/2012 | 5:17:26 PM
re: Europe's Telco Services Suffer Shrinkage

It will be the last CSP standing and it will charge whatever it likes, without competition.

t.bogataj 12/5/2012 | 5:17:15 PM
re: Europe's Telco Services Suffer Shrinkage

YoY change of ETNO reports is nil. See its last year's report (More Pain, No Gain for Europe's Telcos), and the statements are the same: YoY investment change about 5 percent... a trend that can't be sustained... need to develop new business model... new sources of revenues...


I wander what next year's report will be.


T.

digits 12/5/2012 | 5:17:14 PM
re: Europe's Telco Services Suffer Shrinkage

If they wither away and topple into bankruptcy, then an non-traditional CSP, such as Google or a major software or media company, would likely snap up the assets for a pittance.


The companies in danger of extinction are the ones we currently refer to as 'telcos', unless they pull their collective fingers out and start behaving like non-traditional telcos. SO far, that seems to be what sports pundits here in the UK annoyingly refer to as "a tough ask."  

shygye75 12/5/2012 | 5:17:14 PM
re: Europe's Telco Services Suffer Shrinkage

The issue here is more about changing business processes -- and just as importantly, expectations -- to match an environment that is decidedly different from the good old days. It's too bad that this kind of transformation is exactly what "investors" (aka the tail what wags the dog) care nothing about. As long as growth is the No. 1 measuring stick for performance, telcos -- or any other business for that matter -- will be hard pressed to make the necessary adjustments. I'm not convinced that getting into areas that telcos know little or nothing about is the answer.

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